Auto insurance is significantly impacting the financial performance of the property insurance sector in South Korea. As the cumulative effects of premium reductions take their toll, rising costs for parts and repairs have worsened the profitability of major insurers. Additionally, concerns are growing that the introduction of discounts linked to vehicle registration policies will further strain profitability.
According to the insurance industry on May 17, the top five property insurers—Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, KB Insurance, and Meritz Fire & Marine Insurance—reported a loss of 46.1 billion won in the auto insurance sector during the first quarter of this year, a reversal from a profit of 88.8 billion won in the same period last year. This marks a decline in profitability of over 130 billion won within a year.
By company, KB Insurance recorded the largest loss at 24.9 billion won, followed by Hyundai Marine & Fire Insurance with a loss of 14 billion won, Samsung Fire & Marine Insurance with a loss of 9.6 billion won, and Meritz Fire & Marine Insurance with a loss of 6.4 billion won. DB Insurance was the only company to post a profit of 8.8 billion won, but this was an 80.9% decrease compared to the same period last year, when it earned 46 billion won.
The industry attributes the worsening loss ratio in auto insurance as a primary factor. The cumulative loss ratio for the top five insurers in the first quarter of this year reached 85.2%, up from 82.5% in the same period last year. Given that the breakeven point for auto insurance is typically around 80%, this indicates a significant decline in profitability.
The decline in auto insurance performance is largely due to the cumulative effects of premium cuts over the past four years. According to data from the Financial Supervisory Service, the average annual reduction in auto insurance premiums has been as follows: -1.2% in 2022, -1.9% in 2023, -2.5% in 2024, and -0.8% in 2025.
As a result, the auto insurance sector reported a combined loss of 708 billion won last year across 12 companies, a substantial increase from a loss of 9.7 billion won the previous year. This was driven by a decrease in premium income of 407.3 billion won (2.1%) alongside an increase in costs for hospital bills, auto parts, and repair labor, which rose by 364.3 billion won (2.2%).
The outlook remains bleak. The insurance industry anticipates continued upward pressure on loss ratios due to rising prices for vehicle parts, repair labor, and rental costs, influenced by recent inflation trends.
Furthermore, in response to government policies addressing high fuel prices, insurers are expected to face additional profitability pressures as they introduce a 2% discount for auto insurance premiums for vehicles participating in the vehicle registration system.
An industry official stated, "While auto insurance premiums saw a slight increase earlier this year for the first time in five years, the impact of the previous four years of premium reductions continues to drive the loss ratio downward. The delay in implementing the '8-week rule' has further exacerbated the burden on insurers."
* This article has been translated by AI.
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